FILE PHOTO: The corporate logo of financial firm Morgan Stanley is pictured on the company's world headquarters in the Manhattan borough of New York City, January 20, 2015. REUTERS/Mike Segar/File Photo

By Manya Saini and Tatiana Bautzer

(Reuters) -Investment banking giant Morgan Stanley said on Wednesday it will buy private shares platform EquityZen, as Wall Street races to meet growing investor demand for stakes in fast-growing startups.

Major financial institutions are increasingly looking beyond public markets, building capabilities to connect clients with private companies, provide liquidity for pre-IPO shares and capitalize on the rising appetite among investors for early exposure to high-growth startups.

By owning a platform that facilitates trading in pre-IPO shares, banks like Morgan Stanley can capture fees, gain insight into private-market valuations and strengthen relationships with clients seeking exposure to private equity opportunities.

PRIVATE/PUBLIC MARKET DISTINCTION BECOMING BLURRED

"We are seeing rising interest in private markets exposure across our 20 million clients. EquityZen is the link that connects supply and demand," said Michael Gaviser, Head of Private Markets at Morgan Stanley Wealth Management.

EquityZen has over 800,000 registered users and has processed over 49,000 transactions across more than 450 private companies since its inception in 2013.

The acquisition comes as some of the biggest industry-leading private companies delay public listings.

Companies such as ChatGPT-maker OpenAI, Elon Musk's SpaceX and TikTok-parent Bytedance now hold valuations that rival or surpass several major S&P 500 firms, blurring the distinction between public and private market influence.

Last year, Morgan Stanley also signed a deal with Carta, a shareholder management company for startups backed by private equity and venture capital firms.

Atish Davda, founder and CEO of EquityZen, said demand for investment in private companies is soaring and ignoring that alternative could mean investors missing out. The integration with Carta and stock-plan administrator Solium Capital could offer new investment options to Morgan Stanley wealth management clients, he said.

The bank did not disclose the terms of the EquityZen deal, which is expected to close in early 2026.

(Reporting by Manya Saini in Bengaluru. Editing by Krishna Chandra Eluri and Mark Potter)